Pages Jaunes – Sets growth not debt as priority

Yesterday French yellow-pages publisher PagesJaunes said growth was more important than balance-sheet concerns as it wanted the freedom to be part of an expected consolidation among local information providers.

Chief executive Jean-Pierre Remy told an investor conference the group had no debt due until late 2013, and headroom on its debt covenants of more than 20 percent, meaning the company’s net debt of about 2 billion euros ($3 billion) was low priority.

“At the moment, it is not a priority for us to work on the balance sheet,” said Remy, whose company is majority-owned by private equity firm KKR and Goldman Sachs. “We are embarking on a very aggressive growth strategy.

“I think there will be further consolidation in our business. I don’t mean the directory business, but local information,” he said, adding: “We need to get more flexibility on the options we have.”

Not only yellow-pages companies but also local news providers, especially newspapers, have suffered from a slump in classified advertising as small businesses, their main customers, have tightened marketing budgets.

Remy said he expected no rapid improvement on that front. “We don’t expect the advertising market to rebound in the short term or even in the mid term,” he said.

PagesJaunes has been faster than peers such as Britain’s Yell to move its business online, helping its profit margin. Some 40 percent of its 1.2 billion euros in revenues came from online products last year, compared with Yell’s 15 percent. ($1 = 0.6680 euro).

It will be interesting to see how much energy directory publishers now place into mobile. Pages Jaunes has a leading service position in terms of usage, amongst international peers, but recently admitted it has not yet managed to deliver a revenue from the channel. With mobile advertising revenues forecast to grow by over 1,400% over the next three years we should expect the mobile channel to figure prominently?

Should we expect a similar announcement from Yell once their re-financing is behind them, and do we think they can catch-up in mobile?